League of Legends is not a rip off of Demigod. However, it could effectively be called a "rip-off" of DotA. However, that doesn't effectively make the game "bad". The same comment could be made about DG being a rip off of DotA.
League of Legends has fantastic support, loads of characters and different character skins and the runes and masteries give an incentive for people to keep playing and be creative with their builds. It's a good game, with admittedly inferior graphics compared to Demigod. Also, League has pretty nice mechanics too. I'm spending a lot more time on this game these days.
HoN is bad. Don't play it. It's taken the original and very dated DotA and kept all the worst things about it without improving anything.
A lot of the people I used to play Demigod with don't play much anymore, so when I do play nowadays it's kinda for nostalgia if one of my friends is online. There's also a complete lack of competition in demigod now (at the times I play anyway).
Something I've noticed is a lot of the people with a 50% win rate now play something like a 40% played in February. :/
Regarding your query about matchmaking - for matchmaking to work that requires a critical number of players to be playing at any one time in order for matches to be balanced at all. Demigod's gaming population is too low to support this.
With talk of Demigod 2 on the way (to recoup the losses they made in DG1), and SD being busy with Elemental it doesn't look like we're going to get a single other improvement to DG.
I don't blame them. It would only be worth upgrading if there were enough people still buying the game. 
